November 24, 2008
Korean court clears Korean Exchange Bank
A Korean district court ruled Monday the sale of 51 percent of the Korean Exchange Bank to a U.S. equity firm was handled legally.
Lone Star Funds purchased controlling interest in the bank in 2003, at less than market value, when the bank was struggling, Yonhap News Service reported.Prosecutors alleged that Byeon Yang-ho, a director with the finance ministry at the time, and Lee Kang-won, the bank's former chief executive officer, conspired to undervalue the lender to ensure the deal would be made.
Lone Star Funds paid $550 million for its shares. At the time of the sale, however, the bank's capital adequacy ratio was 9.55 percent, higher than the Bank for International Settlement standard of 8 percent used to measure a bank's health, Yonhap reported.
However, the court ruled the bank's financial straits made the sale
unavoidable and said no downgrading had occurred.
The Korea Exchange Bank needed a large capital injection at the time, said Judge Lee Kyoo-jin of the Seoul Central District Court.
A spokesman for the Supreme Prosecutors' Office, Choi Jai-Kyeong, said prosecutors will appeal the case to a higher court.